Pivot Points on Price
The pivot point level itself will act as a level of support/resistance andusually the largest price movments will occur around this level. The other support and resistance levels are just that and can slow down a movement in a stock/index or encourage it to bounce/retrace at that level.
Pivot points are set at the beginning of the days trading and based on the previous days action. Therefore they are good short-term indicators and can be used to define a trend in the market or for entry and exit points for a trade.
Pivot points and the Levels of support and Resistance are relatively easy to calculate. All that is required is the Open, Close, High and Low of the previous days trading.
Pivot point (P) = (yesterdays high + yesterdays low + yesterdays close)/3
Resistance Level 2 (R2) = P + (yesterdays high - yesterdays low)
Resistance Level 1 (R1) = 2*P - yesterdays low
Support Level 1 (S1) = 2*P - yesterdays high
Support Level 2 (S2) = P - (yesterdays high - yesterdays low)